Bitcoin and cryptocurrencies can often feel like an unfamiliar road. Here’s a handy guide to understanding the twists and turns.
Bitcoin is an exciting investment opportunity for many people all over the globe. But it also is capable of functioning as a standard type of currency, or an alternative to fiat. Which means that there are a number of varied reasons that someone may be interested in purchasing and trading bitcoin. While the cryptocurrency market is fairly well known around the world, many are still new to actually using it.
Now more than ever, people are choosing to invest and deal in bitcoin and other cryptocurrencies. From the purchasing of goods, to storing values, and trading for profits, there are a number of reasons that the cryptocurrency markets are seeing a spike in adoption. A number of exchanges are set up in such a way that enable new users to purchase and learn about cryptocurrencies. Bitvavo is one that is designed for all traders, but also for new users, to help guide them through some of the intricacies of the system.
Know Before You Go
Cryptocurrency on-ramps and off-ramps describe systems of buying and selling cryptocurrencies, while each is discussed at length later. There are a few things you’ll need before you start your bitcoin road trip. Essentials likes wallets, a trusted exchange platform and some general knowledge on the legislations concerning bitcoin and other cryptocurrencies in your country.
Wallets vary depending how you plan on using your bitcoin. Wallets designed for long term use, that aren’t connected to the internet are considered cold storage wallets. Oftentimes, these types of wallets are hardware wallets, or special drives that are accessory to your computer itself. Wallets that are stored on your computer are called software wallets. These wallets can be provided by the exchange you use or a third party. These are often referred to as hot storage and should only be used to store coins you actively plan on trading. There are a number of other types of wallets for specialty trading and interests. Learn more and choose the one that best fits your needs before purchasing your bitcoin, you’ll need something to put it in.
Exchanges are online platforms that allow you to purchase bitcoin and other cryptocurrencies. These can be centralized exchange platforms, or they can be decentralized. There are also things called peer-to-peer, or P2P networks. These networks connect you with other bitcoin users who are looking to buy, sell, and trade cryptocurrencies. Each type of exchange comes with their own pros and cons, so do a little research before choosing a preferred platform.
Laws vary greatly from country to country when it comes to bitcoin. Different places will have different legislation regarding a number of different aspects of bitcoin trading, including KYC protocols for wallet generation and tax laws. Make sure you familiarize yourself with your local laws before you buy any cryptocurrency.
What is a Bitcoin On-Ramp?
Now that you have your wallet in place, your exchange chosen, and all applicable laws figured out, you’re going to need to understand some basic lingo. Bitcoin on-ramps refer to any exchange or P2P network where you can offer fiat in return for cryptocurrency. Simply put, on-ramps allow you to buy bitcoin using a local monetary currency, or fiat.
Depending on the exchange you’ve chosen will dictate whether or not you’ve found a good on-ramp. Not all exchanges allow fiat to bitcoin conversion. Some just deal in trading bitcoin for bitcoin, or bitcoin for other cryptocurrencies. Another type of on-ramp- although far less common, are bitcoin ATMs. Bitcoin ATMs function similarly to regular ATMs, but instead of pulling money out of your bank account using a debit card, you pay for bitcoin with fiat and then dictate which wallet the newly purchased coins are despoiled into.
What is a Bitcoin Off-Ramp?
As you might expect, bitcoin off-ramps function in direct opposition to bitcoin on-ramps. A bitcoin off-ramp allows users to convert bitcoin into fiat. Off-ramps can also be used to purchase goods or services with bitcoin. In essence, bitcoin off-ramps are where you exchange your bitcoin for another product, whether that be money, or something else.
Off-ramps are used for a number of purposes, and what you plan on doing with your bitcoin will largely dictate what manner of off-ramp you use. For example, if you’re looking to trade bitcoin for altcoins, or fiat, Bitvavo and other exchange platforms are a good place to do this. For goods and services, the retailer themselves will act as the off-ramp. Many investors use bitcoin as a way to increase fiat capital, that means that eventually, they will look to exchange their coins for fiat, turning a profit in their local currency. Others, use bitcoin as a currency itself- being a simple and safe way to purchase goods and services online. For the purchase of goods and services in bitcoin, users will not need to use an exchange to convert bitcoin into another currency beforehand. Instead they pay the retailer directly in bitcoin.